As we expected, the integration of Visa Europe is progressing well, and the firm remains a growth juggernaut in the financial-services industry. Visa is guiding to net revenue growth approaching 18% for its full fiscal 2017 year, including 2.0% to 2.5% of negative impact from the strong U.S. dollar. At the same time, its minimal reinvestment needs—the company spent only $317 in capital expenditure over the last six months—ensure that its owners share in the rewards. The payment network returned cash in the form of dividends and repurchases at an annualized rate of just below 4% of market capitalization during the quarter, and just authorized an additional $5 billion in repurchases. The wide moat company’s stock price is approaching our $101 fair value estimate as it continues to benefit from its excellent competitive position and growth of the electronic payment market.

The quarter’s results were impacted by two charges produced by the acquisition of Visa Europe--a $1.5 billion income tax provision and a $192 million expense related to the establishment of the Visa Foundation. Excluding these items, adjusted EPS expanded at an impressive 27%. We expect earnings to continue growing at a healthy rate for the foreseeable future thanks to the company’s dominant status in the payment industry.

Although large customers continue to demand a share of revenue, client incentives totaled 18.7%, with management guiding toward the bottom of a 20.5%-21.5% range for the full year. We believe customers will continue to demand a larger share of revenue in exchange for volume, but expect that underlying market growth will offset the impact of slight pricing pressure.

Visa’s highly profitable cross-border transaction volume expanded by 11% over the past 12 months, including Europe and ignoring currency movements. We think these solid results in a period of moderate geopolitical turmoil bode well for cross-border volume growth over time.

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